Investing in a cash accumulation fund is an excellent idea simply because the accumulation of cash is the necessary foundation for making any other kind of financial investment. If you have already set up a fund that you intend to use for investing in cash accumulation, you should strive to invest as much as you possibly can.
A cash accumulation fund is a fund in which you intend to accumulate cash for the sole purpose of allowing the money to grow and earn compound interest over a long period of time. Cash accumulation funds are most commonly established at banks and other financial institutions that pay interest on your deposits.
The money you invest in a cash accumulation fund should be a top priority in your spending budget. That means when you receive income, you should contribute the amount of money you plan to invest in the cash accumulation fund before paying any other bills or expenses. It's also a good idea to make your contributions automatic through direct deposit, if possible.
Once money goes into your cash accumulation fund you should not withdraw it for any reason other than to make other investments when you have enough cash to do so. You must resist pressure from family, friends and even your own temptations to spend the money as it begins to grow so that your investment can receive the full benefit of compound interest.
Once you have accumulated several thousand dollars in your cash fund you may want to invest the cash in other investments that will pay a higher rate of return than bank CDs, bank savings accounts and money market accounts. But be careful not to place the cash in investments that will go down in value.
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